One of Tuxedo’s most popular offerings enables consumers to add value to their prepaid cards online via a credit or debit card without having to link to a bank account. However, the site soon became a target for criminals who would use stolen payment cards to add value to prepaid cards, the company says. Criminals have long been attracted to the anonymity of prepaid cards and often use them in money laundering schemes.

Crime on the site escalated so much that Tuxedo briefly stopped allowing consumers to add value to their cards online. While Tuxedo won’t say what its fraud rate was, the company says it was at risk of incurring fines from card companies and was added to a merchant watch list because of its high rate of chargebacks.

Seeking to restore the service, which prepaid card users used often and which Tuxedo’s clients liked to offer their customers, Tuxedo turned to fraud prevention and payment services vendor ReD Worldwide for help. Tuxedo implemented ReD’s ReD Shield product that quickly screens for fraud by looking at several attributes of a transaction and approving or denying it in a few seconds.

The service draws on a multimerchant database of both legitimate cards that have been used for successful purchases and stolen cards that, for example, have been tied to chargebacks. It also uses databases of lost or stolen payment cards, IP geo-location and device IDs to recognize suspicious transactions. For example, a shopper using a computer located in Transylvania and attempting to pay using a card with a billing address in the U.K., might be flagged.

The service also enables clients such as Tuxedo to review transactions and see why they were accepted or denied and manage or change fraud-screening rules and cross-check names, addresses and phone numbers registered with payment cards with the information the consumer enters.

After working with ReD to implement fraud screening, Tuxedo was able to reinstate its online payment services. Tuxedo, which before was on the verge of incurring fines by card companies, is no longer on the watch list, the company says.

Fraudulent transactions now represent less than 1% of its sales and the web is now one of the most popular ways for prepaid card users add value, with consumers adding $1.5 million per month to their prepaid cards via Tuxedo’s site, the prepaid card provider says.

ReD charges a service set-up fee and a cents-per-transaction fee based on volume with a monthly minimum. Fees vary based on the program a merchant implements, ReD says.